CloudApps and FinancialForce combine resources to account for carbon.

3rd July 2010

Many column-inches have been devoted to environmental reporting, for example, what greenhouse gases, CO2 emissions, particulates and waste to measure and how. But now that environmental regulation has real ‘teeth’ and the financial consequences of so called ‘cap and trade’ schemes such as the CRC Carbon Reduction Commitment are more tangible there is a pressing need to transition from the theory of environmental reporting to the ‘nuts and bolts’ of recording carbon impacts in the financial statements.  Gary Simon, managing editor FSN takes a look at a relatively new cloud-based product ‘CloudApps’ designed to demystify the management of carbon and help record the impact in popular accounts packages such as FinancialForce.com.

For most finance professionals environmental reporting is uncharted territory. Accounting standards have not kept pace yet many companies are faced with environmental disclosures for the first time – and it isn’t just the obvious polluters in the energy, chemicals and manufacturing space.  It is suggested that around 20,000 companies in the UK are caught by the Carbon Reduction Commitment Scheme (CRC) which is already underway in the UK. You can read expert FSN coverage about the scheme here. But the pressure for this novel kind of reporting is a global phenomenon, fuelled by political pressure and a worldwide clamour for companies to be more accountable for the environmental resources they consume and the damage they cause on the way.

In fact companies operating on a global basis can quickly find themselves exposed to a number of reporting regimes each with a different set of specific requirements – which is why, according to Simon Wheeldon, CEO CloudApps, the reporting philosophy behind the product is “Capture once disclose many.”

In fact Wheeldon sees carbon reporting as a journey, commencing with the capture and measurement of different types of consumption or emissions, the need to comply with regulation, the comparison of carbon performance across the business (externally as well), engaging with the workforce and finally monetising or deriving the financial impacts of carbon on the business – both costs and savings.

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Up until quite recently that is where the journey ended, but a recent partnership with FinancialForce.com which shares the same platform as SalesForce.com has extended the reach of CloudApps solutions right into the heart of financial accounting.  So how does it all work?

As the name suggests, CloudApps is a cloud based application which helps to eliminate some of the initial complexity of in house or on-premise solutions. You can sign-up with CloudApps for a trial and start using the application straight away.

CloudApps is set up to gather data from a number of sources. Using the CloudApps Carbon solutions, companies can automate the loading of data through integration to utility management systems, meters and travel and expenses systems. Based on business rules and scheme requirements the application automates the production of emission disclosure reports. Companies can then use the application to segment emissions by geography, business division or even facility, across all major emission sources and directly generate their Carbon Disclosure Project (CDP) submission reports. CloudApps holds a variety of different conversion tables to cater for different global standards.  For example, global emissions factors (say the conversion of electricity consumption in megawatts to tonnes of CO2) published by the International Energy Agency (IEA), the Inter-governmental Panel on Climate Change (IPCC), the US Environmental Protection Agency (EPA), the UK’s Department for Environment, Food and Rural Affairs (DEFRA) and individual companies may all be different.

Once the raw data is captured and calculated companies can allocate their emissions data into business structures, helping them to understand consumption levels across the business and allowing them to create reduction targets and foster ownership within different parts of the business. CloudApps makes full use of social media capability to help companies engage their workforce in their carbon reduction efforts.

But as many environmental campaigners point out compliance often makes good business sense as well –especially when linked to cost reduction programmes based on environmental measures. So the CloudApps application allows users to select and manage emission reduction programs. This in turn starts the process of translating carbon over and under consumption into financial terms, for example, to forecast future energy consumption needs and predict how many carbon allowances will need to be purchased in advance. As readers of FSN will recall, ‘Cap and Trade’ schemes have both Profit & Loss account and cash flow effects.

Bridging the environmental and accounting worlds has nearly always been an obstacle – solutions have previously either had one capability or another but CloudApps partnership with FinancialForce is distinct. FinancialForce it will be remembered was CODA’s (now Unit4’s) foray into cloud computing leveraging the SalesForce.com platform. Unlike many cloud based accounting start-ups FinancialForce put sophisticated accounting in the hands of companies that simply preferred a cloud-based model.

The net impact of carbon usage is reflected in ‘footprints’ a record of the carbon consumption from different sources allocated to specific areas of the business . The financial value of these footprints, based on price per tonne of carbon, is what is taken into FinancialForce.  Effectively, carbon is treated as a currency and transactions generated in CloudApps can immediately be brought into the general ledger.  Indeed the system can also record carbon liabilities and assets with regulators, resulting from over or under consumption. These are reflected in the balance sheet exactly as any other asset or liability. Every change in CloudApps can, if required, give rise to a parallel transaction in FinancialForce.

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But the integration is more than skin deep and although CloudApps is agnostic when it comes to financial system the user interface in Financial Force has been adapted to give it the same look and feel.

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Of course accounting for carbon is just as much a phenomenon of the private sector as it is the public sector. The topic is becoming particularly sensitive in the latter where companies wishing to conduct business in the public sector have to demonstrate their green credentials. Getting started is probably the biggest obstacle and although CloudApps is relatively new to the market its simplicity and accessibility may prove to be just what companies are looking for.

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